Indexing—Canadian Armed Forces pensions
Indexing is inflation protection which is applicable to all Canadian Armed Forces (CAF) pensions and is administered in accordance with the provisions set out in Part III of the Canadian Forces Superannuation Act (CFSA) - Supplementary Benefits - and the Supplementary Retirement Benefits Act (SRBA).
Annual increases are determined by increases in the Consumer Price Index (CPI) and are announced by Treasury Board in late fall of each year. The initial increase (if the pensioner was released from the CAF prior to 22 June 1982) is based on the cumulative increases from 1 January of the releasing year to 31 December of the year prior to the entitlement being applied. In the case of a former CAF member who was released on or after 22 June 1982, the initial increase is based on the cumulative increases from the 1st day of the 1st full month following the month in which the member received a pension.
Once the CAF pensioner has received the initial cumulative increase, annual increases, at the rate announced by Treasury Board in the preceding fall, are applied in January of each year thereafter. All CAF pensioners receive an annual information bulletin about indexing each January.
You may want to know
When will my Canadian Armed Forces pension first become indexed?
Normally, on the 1st of the month of your birthday, between the ages of 55 and 60, depending on how many full years of pensionable service you have to your credit.
The first increase will never commence later than age 60. If, prior to your normal entitlement age, you become disabled and are in receipt of Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) disability benefits, contact the Government of Canada Pension Centre to apply for early indexing.
Your first indexing increase will be implemented on 1 January of the year following your year of retirement. This amount will be pro-rated to reflect the number of full months remaining in the year of your retirement. In subsequent years, you will be entitled to the full increase.
Once you have retired, your pension is increased on 1 January of each year to take into account the cost of living, based on increases in the Consumer Price Index (CPI).
Who is entitled to indexing?
- persons whose number of complete years of pensionable service when added to their age totals 85 commencing at:
- age 55, if pension is based on 30 or more years of pensionable service
- age 56, if pension is based on not less than 29 years of pensionable service
- age 57, if pension is based on not less than 28 years of pensionable service
- age 58, if pension is based on not less than 27 years of pensionable service,
- age 59, if pension is based on not less than 26 years of pensionable service
- age 60, if pension is based on less than 26 full years of pensionable service
- all survivor's allowance recipients, including children, regardless of age;
- persons who are under 60 years of age and were released due to disability (only if they were released on or after 1 April 1991); and
- pensioners who, prior to their normal entitlement date, become entitled to Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) disability benefits and apply for early indexing
How is indexing calculated?
The percentage by which pensions increase is equal to any increase in the average of the Consumer Price Index (CPI) for Canada in the 12-month period ending 30 September compared to the same period in the previous year. If there is no change in the CPI, or if it drops, there is no indexing. The result of this calculation is applied to pensions on 1 January of each year.
As an illustration, outlined below are the data used to calculate the 2015 pension increase.
| Month/Year | CPI% | Month/Year | CPI% |
|---|---|---|---|
| October 2012 | 122.2 | October 2013 | 123.0 |
| November 2012 | 121.9 | November 2013 | 123.0 |
| December 2012 | 121.2 | December 2013 | 122.7 |
| January 2013 | 121.3 | January 2014 | 123.1 |
| February 2013 | 122.7 | February 2014 | 124.1 |
| March 2013 | 122.9 | March 2014 | 124.8 |
| April 2013 | 122.7 | April 2014 | 125.2 |
| May 2013 | 123.0 | May 2014 | 125.8 |
| June 2013 | 123.0 | June 2014 | 125.9 |
| July 2013 | 123.1 | July 2014 | 125.7 |
| August 2013 | 123.1 | August 2014 | 125.7 |
| September 2013 | 123.3 | September 2014 | 125.8 |
| Total | 1,470.4 | Total | 1,494.8 |
| Monthly average | 122.5 | Monthly average | 124.6 |
The pension increase (indexing rate) for 2015 is the percentage increase in the monthly average CPI. This is calculated by subtracting the monthly average for the first period (October 2012 to September 2013) from the average for the second period (October 2013 to September 2014), then dividing this amount by the monthly average for the first period and finally multiplying it by 100, as follows:
124.6 - 122.5 = 2.1
(2.1 ÷ 122.5) x 100 = 1.7% (indexing rate for 2015)
Will I be notified before my pension becomes indexed?
The Government of Canada Pension Centre will notify you of any changes to your pension before the changes are applied. Also, Canadian Armed Forces (CAF) pensioners receive an annual information bulletin about indexing each January.